Design of fiscal consolidation packages and model-based fiscal multipliers in Croatia*

Revenues

Expenditures

2014

·      Increase of the rate of healthcare contributions from 13% to 15% (0.49% of GDP)

·      Increased social security contributions due to the shift of part of the future pension contributions to the first pillar (0.12% of GDP)

·      Higher fuel excises (0.11% of GDP)

·      Other revenues side measures: changes in the lottery and gambling taxes, SOEs dividend and profit withdrawal, increase of telecom fees and other concession fees (0.1% of GDP)

·      increase of reduced VAT rate from 10% to 13% (0.12% of GDP)

·      Lower intermediate consumption due to savings, among other, on maintenance costs, transportation costs, IT services (0.3% of GDP)

·      Reduction of subsidies, mostly to shipyards, HBOR and railways (0.4% of GDP)

·      Savings in social transfers, mostly in the health sector and privileged pension outlays (0.3% of GDP)

·      Reduction of current and capital transfers, mostly due to replacement with EU funding (0.1% of GDP)

·      Reduction of subsidies (0.2% of GDP)

·      Lower public investment (0.1% of GDP)

·      Extrabudgetary users and other general government entities, mainly in Croatian Roads and Croatian Waters (0.4% of GDP)

·      Savings on general government compensation of employees (0.2% of GDP)

2015

·      Increase of the rate of healthcare contributions from 13% to 15% (0.25% of GDP) - a residual effect of the measure introduced in 2014;

·      Changes in the lottery and gambling taxes (0.05% of GDP) - a residual effect of the measure introduced in 2014;

·      Increased social security contributions due to the shift of part of the future pension contributions to the first pillar (0.04% of GDP) - a residual effect of the measure introduced in 2014;

·      Tax on savings interest (0.07% of GDP);

·      Higher fuel and tobacco excises (0.16% of GDP).

·      Reduction of subsidies for agriculture, active labor market policies and Croatian Bank for Reconstruction and Development (0.03% of GDP)

·      Social benefits savings on housing loan subsidies and preferential pensions above 5000 HRK, and consolidation of social benefits (0.05% of GDP)

·      Savings of extrabudgetary users, in particular Croatian Waters, Croatian Health Insurance Fund, Croatian Highways, Croatian Railway Infrastructure (0.5% of GDP);

·      Reduction of transfers, mainly guarantee funds (0.13% of GDP);

·      Reduction of investment expenditure of the central and local government units (0.5% of GDP).

2016

·      SOEs dividend and profit withdrawal (0.2% of GDP);

·      Higher fuel and tobacco excises (0.06% of GDP) - a residual effect of the measure introduced in 2014

·      New treatment of reinvested earnings in the corporate income tax system (0.15% of GDP)

·      Introduction of capital gains tax

·      Lower intermediate consumption due to implementation of "standard material costs guidelines" (0.05% of GDP);

·      Further reduction of subsidies of some activities and substitution with EU funds (0.16% of GDP);

·      Reduction of social benefits through their further integration and decreasing unemployment (0.13% of GDP)

·      Savings in other transfers through expiry of certain programs and substitution with EU funds (0.21% of GDP);

·      Reduction of investment expenditure in defense, health, education, science (0.07% of GDP)

2017

·      Reduction of investment expenditure of the central and local government units (0.5% of GDP)

·      Reduction of capital transfers (0.5% of GDP)

2013

2014

2015

2016

2017

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Pre-EDP consolidation phase

Main EDP consolidation phase

Implementation phase of the EDP measures

Croatia joins EU

EC proposes opening of EDP for Croatia

Council opens EDP for Croatia

Main EDP fiscal package of measures

EC gives positive assessment of the fiscal effort

EDP in abeyance

EC proposes closing of EDP for Croatia

Council closes EDP for Croatia